Supply Uncertainty of Institutional Bond Investors and the Leverage of the Firm

Abstract

We examine the effects of the capital supply uncertainty (CSU) of institutional bond investors (e.g., mutual funds and insurance companies) on the leverage of the firm using a novel dataset. We find that the withdrawal risk (or instability) of the firm’s bond investor base (as measured by (i) the average portfolio turnover of investors holding the firm’s… (More)